Many people dream of starting a company or joining a startup. It’s your chance to make something of your own or to start on the ground floor of something important and potentially world-changing. It also offers the flexibility and culture many people value.

But there’s high risk with that reward. Startup founders and early employees often come from corporate jobs. They sacrifice pay and benefits for the prospect of building something great. One thing they need to focus on building? Their benefits package, including long-term disability insurance.

Why startup employees need disability insurance

It’s hard to get an exact count of how many startups there are, but it’s safe to say the answer is, “A lot.” AngelList, a company that helps connect startups to funding and talent, has more than 35,600 startups in its database.

As startups become a more popular form of employment, more people will find themselves with jobs that may not provide the financial safety net they need. One in four workers will become disabled before they retire. If you don’t have disability insurance, whether you’re a company founder or employee, you’re putting yourself at risk of not being able to make ends meet and potentially forcing yourself to have to go back to the corporate grind to get yourself on stable ground.

Startup founders

Founders are the lifeblood of any startup. They often set the vision and tone for the company, and take a position of power as the chief executive officer, chief technology officer, chief operating officer, chief financial officer or chief marketing officer. But they often don’t have the salary or benefits those positions come with at a more established company. Every bit of income and protection counts when a company is just getting off the ground.

If a startup founder becomes injured or ill, it becomes hard to keep up with bills. If that happens, they might need to find a job that’s more stable or has higher pay — that means giving up on their dream. With disability insurance, a founder has a financial safety net that will allow them to return to their company when they recover instead of working elsewhere just for a paycheck.

Startup employees

Most early startup employees have invested a lot in their education and development, whether they’re software engineers, product managers or operations managers. They need to protect their future income potential, especially when benefits are at a minimum.

Most startups choose health insurance as their priority benefit, for good reason. That still leaves employees to fend for themselves when it comes to retirement contributions, life insurance and disability insurance.

Startup employees may not be able to get the full disability benefit amount due to lower startup incomes. But if you work with an independent broker (like Policygenius), there may be discounts available if multiple employees sign up for disability policies.

Best disability insurance companies for startup employees

Company

30 years old

40 years old

50 years old

Ameritas

$110.76/mo | $1,281.40/yr

$176.76/mo | $2,048.80/yr

$271.65/mo | $3,152.20/yr

Assurity*

$125.90/mo | $1,447.29/yr

$211.45/mo | $2,430.35/yr

$281.55/mo | $3,236.69/yr

Guardian

$132.09/mo | $1,585.13/yr

$201.87/mo | $2,422.50/yr

$305.69/mo | $3,668.26/yr

Principal

$136.68/mo | $1,562.00/yr

$206.02/mo | $2,354.50/yr

$304.54/mo | $3,480.50/yr

The Standard

$127.51/mo | $1,457.30/yr

$184.84/mo | $2,112.47/yr

$276.88/mo | $3,164.31/yr

MassMutual

$105.19/mo | $1,237.20/yr

$162.26/mo | $1,896.88/yr

$260.81/mo | $3,036.20/yr

Mutual of Omaha**

$126.80/mo | $1,449.00/yr

$190.48/mo | $2,176.77/yr

$291.59/mo | $3,332.41/yr

*Non-cancelable not available

**To age 67 only, non-cancelable not available

These sample rates are based on a male non-smoker from New York with a degree and income of $100,000. Your exact coverage will vary by your state, income, (or past income, which we’ll get to below) and other factors. You should talk to a licensed broker or agent to find the policy you need.

These policies are also based on a $5,000 monthly benefit, a 90-day elimination period and a benefit period to age 65. They are own-occupation, partial benefit, non-cancelable policies with a future purchase option and automatic increase benefit.

Protect your income

Are you a startup employee who needs disability insurance? Start shopping now.

What startup employees need to know about disability insurance

As a startup employee, your income might be lower than what it was at a more established job, but it could also be higher in a few years if your company finds its footing. Still, there are ways to get affordable, comprehensive coverage.

Know how much coverage you can get

Your disability coverage is typically based on your income. But if you’re working at a bootstrapped startup, you might not be getting paid that much. How do you get enough protection?

Some insurance carriers base the maximum coverage for startup founders on the founders’ previous job or their industry. That means you don’t need to necessarily base your coverage on what you’re actually making when you apply.

Have the right documentation ready

Keeping that in mind, it’s important to have the right paperwork to make things easy. To prove your benefit needs, you should have past tax returns or signed contracts ready. This will help carriers know you’re not over- or underinsured.

Look for discounts

Getting protected doesn’t need to be expensive. If three or more employees set up policies with the same carrier, you may be able to tap into discounts.

This isn’t the same as a group disability policy offered by many employers. Those typically don’t provide adequate coverage, and they’re tied to your job so you lose the policy if you go elsewhere. In this case each person owns their own policy, but a broker can help you save on cost if there are multiple applicants. Think of it like buying in bulk at the grocery store.

Choose a future purchase option rider

Long-term disability insurance riders allow you to customize your disability policy so it fits your specific needs. Some come default on policies while others cost extra. An agent can help you figure out which ones you might need. One rider startup employees should consider is the future purchase option. This lets you increase your coverage amount down the line without needing to go through the underwriting process again, “locking in” your insurability. This is especially important for someone working at a startup, since growth can be faster than at established companies, allowing your coverage to keep pace with the potential increase in income.

Policygenius’ editorial content is not written by an insurance agent. It’s intended for informational purposes and should not be considered legal or financial advice. Consult a professional to learn what financial products are right for you.

Yes, we have to include some legalese down here. Read it larger on our legal page. Policygenius Inc. (“Policygenius”) is a licensed independent insurance broker. Policygenius does not underwrite any insurance policy described on this website. The information provided on this site has been developed by Policygenius for general informational and educational purposes. We do our best efforts to ensure that this information is up-to-date and accurate. Any insurance policy premium quotes or ranges displayed are non-binding. The final insurance policy premium for any policy is determined by the underwriting insurance company following application. Savings are estimated by comparing the highest and lowest price for a shopper in a given health class. For example: for a 30-year old non-smoker male in South Carolina with excellent health and a preferred plus health class, comparing quotes for a $500,000, 20-year term life policy, the price difference between the lowest and highest quotes is 60%. For that same shopper in New York, the price difference is 40%. Rates are subject to change and are valid as of 2/17/17.